ACCT 200 1st Edition Lecture 7 Outline of Last Lecture I Brief Exercise 3 3 II Chapter 3 Notes III Brief Exercise 3 6 IV Brief Exercise 3 10 V Brief Exercise 3 11 VI Brief Exercise 3 12 VII Brief Exercise 3 13 VIII Exercise 3 13 Outline of Current Lecture I Review of activity 2 answers II Classified balance sheet III Review of adjusting journal entries IV E 3 14 a b V Closing entries Current Lecture Part 1 Debits will increase assets decrease liabilities decrease common stock decrease retained earnings decrease revenues increase expenses increase dividends Credits will decrease assets increase liabilities increase common stock increase retained earnings increase revenues decrease expenses decrease dividends Part 2 1 2 3 4 5 Cash dr 2000 common stock cr 2000 Acct receivable dr 4000 service revenue cr 4000 Cash dr 2000 unearned revenue cr 2000 Supplies dr 1000 acct payable cr 1000 Dividends dr 3000 cash cr 3000 Part 3 a Assets not change or increase and decrease Liabilities not change Equity not change b Assets decrease Liabilities not change Equity decrease c Assets increase Liabilities increase Equity not change Part 4 Cash balance sheet dr Revenues income statement cr Accounts payable balance sheet cr Inventory balance sheet dr Unearned revenue balance sheet cr Insurance expense income statement dr Wages expense income statement dr Prepaid insurance balance sheet dr Long term notes payable balance sheet cr Common stock balance sheet and statement of stockholders equity cr Classified Balance Sheet Use convert to cash within 12 months current asset Pay within 12 months current liability If it s not current then it s long term Have certain subtotals Total current assets Net property plant and equipment Total assets Total current liabilities Total liabilities Total equity Total liabilities and equity Review of adjusting journal entries Prepaid expenses supplies prepaid insurance prepaid rent Original entry dr prepaid insurance cr cash Adjusting entry dr insurance exp increase expense decrease equity cr prepaid insurance decrease asset Only adjust for amount that has been used Adjusting entries NEVER change cash account Examples Prepaid unearned revenue cash in advance Original dr cash cr unearned revenue Adjusting entry dr unearned revenue cr service revenue Depreciation we record to show usage of long term equipment such as vehicles Adjusting entry dr depreciation expense cr accumulated depreciation Accumulated depreciation is a contra asset listed with the assets but is subtracted from assets Equipment 100 000 dr Accumulated depreciation 10 000 cr Net equipment 90 000 net value dr Accrued revenues revenue earned but not recorded interest on investments record a sale on account Adjusting entry dr acct receivable cr revenue Accrued expenses have been incurred but not yet recorded Adjusting entry dr expense wages due cr liability 2 types of questions you could see on an exam a record depreciation expense dr depreciation expense cr accumulated depreciation b what is the impact on the accounting equation decrease assets and decrease equity Say beginning balance is 10 000 cr depreciation expense accumulated depreciation is 5000 ending balance after adjusting entry is 15 000 net value 50 000 asset 15 000 balance 35 000 net value on balance sheet E 3 14 a 6000 prepaid rent 6 months 1000 month Dr rent expense 2000 Cr prepaid rent 2000 2 months Rent expense Prepaid rent 2000 6000 2000 2000 4000 b Dr Cr unearned revenue 500 service revenue 500 Unearned revenue 2000 500 1500 Closing entries Resets balance to 0 at end of year for revenues expenses and dividends Service revenue 45 000 500 45 500
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